O Globo newspaper
Danielle Nogueira
February 12, 2011
Mining company to double investment in logistics to US$5 billion and duplicate Carajás Railroad
With the prospect of higher iron ore prices this year – estimates point to a rise of at least 20% in the average price, to US$115 per ton – Vale plans to invest US$5 billion in logistics in 2011, practically twice last year’s planned figure. The objective is to guarantee Vale’s leadership among Brazil’s biggest exporters. Last year, the company exported US$24 billion, or 122% more than in 2009, according to the Ministry of Development, overtaking Petrobras, which had ruled the roost in recent years. The Brazilian Foreign Trade Association (AEB) estimates that Vale’s exports will reach US$32 billion this year, a 33% increase on 2010’s result.
Last year, Vale’s planned investment in logistics was US$2.654 billion – as the company only discloses its results for the fourth quarter of 2010 on February 24, it cannot yet reveal the total actually invested. Besides being twice the estimated figure for 2010, the US$5 billion allocated for logistics this year corresponds to 21% of Vale’s total planned investment for 2011 (US$24 billion). This is another ace up Roger Agnelli’s sleeve in his tussle with parts of the government that are trying to replace him as head of Vale, on the grounds that the company should invest more in steelmaking and logistics.
Terminal in São Luís will also be expanded
The main project in this area in 2011, accounting for nearly one third of the resources (US$1.4 billion) destined for logistics, is the expansion of the Carajás (Pará) iron ore mining complex transport corridor. This is the single biggest project in 2011. Called the Northern Logistics Upgrade project, it entails duplicating the Carajás Railroad (EFC), a single-track line linking Carajás to the city of São Luís (Maranhão), and enlarging Ponta da Madeira Maritime Terminal in São Luís.
The magnitude of the investment makes clear the importance of the project for Vale. The North region has the brightest growth prospects for iron ore, the company’s main product. By duplicating the Carajás Railroad, its ore transport capacity will rise from around 120 million tons to 230 million tons by 2014/2015. This jump will allow Vale to raise its domestic production target from 311 million tons of iron ore in 2011 to 522 million tons in 2015.
“Work on the railroad begins this month. In 2011, it should transport more ore than Vitória-Minas (another Vale railroad and currently the country’s leading transporter of iron ore),” says Vale’s Integrated Operations executive director, Eduardo Bartolomeo. By duplicating EFC, Vale also intends to increase its rail shipments of third parties’ goods and continue to surf the commodities boom. The company recently finished building the stretch of the North-South Railroad that links EFC to Palmas (Tocantins), an agricultural frontier area.
“Our strategy is based on demography and growth in emerging markets, such as China and India, which will demand more ore and food.